If you have received a notice lately about the HIRE Act and your 941 payroll tax liability, you may be relieved to know that even the IRS makes mistakes sometimes.
Here is some background. The 2010 HIRE Act — Hiring Incentives to Restore Employment — was meant to encourage certain employers to add to their payroll by forgoing their 6.2% share of Social Security on wages for the period March 19 – December 31, 2010. Because the HIRE Act did not exist until the end of the first quarter of 2010, the IRS didn’t have the revised 941 form ready in time for first-quarter 941 payroll tax reporting.They advised employers to instead claim any HIRE Act wages from March 19-31, 2010, on their second-quarter payroll tax period ending June 30, 2010.
The updated form had a special line-item (line 12e) to report any HIRE Act wages that were not reported in the first quarter. But due to a computer glitch, the IRS mailed some employers erroneous CP207 notices that proposed penalties for failure to pay payroll taxes. Some employers also received CP276B notices asking them to review their records.
The good news is that the IRS has recognized their error and reversed mistaken penalty assessments on business owners.